BILL NUMBER: SB 1933	CHAPTERED  09/24/00

	CHAPTER   619
	FILED WITH SECRETARY OF STATE   SEPTEMBER 24, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 23, 2000
	PASSED THE SENATE   AUGUST 30, 2000
	PASSED THE ASSEMBLY   AUGUST 28, 2000
	AMENDED IN ASSEMBLY   AUGUST 25, 2000
	AMENDED IN ASSEMBLY   JULY 5, 2000
	AMENDED IN SENATE   APRIL 25, 2000
	AMENDED IN SENATE   APRIL 6, 2000

INTRODUCED BY   Senator Vasconcellos
   (Coauthors:  Senators Chesbro, Costa, and McPherson)

                        FEBRUARY 24, 2000

   An act to add and repeal Part 18.3 (commencing with Section 38061)
of Division 2 of the Revenue and Taxation Code, relating to
taxation.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1933, Vasconcellos.  Taxation and the new economy.
   Existing law provides for various taxes.
   This bill would establish, until 2004, the California Commission
on Tax Policy in the New Economy.  The commission would examine the
impact of Internet and other forms of electronic technology on
various types of taxes.  The commission would be required to submit a
report to the Governor and the Legislature on its findings.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  The Legislature find and declares all of the following:

   (a) With the rapid development of the Internet and electronic
commerce, policymakers at all levels of government are confronted
with the challenge of finding ways to encourage this new technology
and its impact on our economy continuing to develop prosperously,
while addressing the needs for tax equity and assurance that
governments at all levels have sufficient revenue to continue
providing essential services critical to our economy's continuing
growth.
   (b) The current national debate on Internet taxation has focused
almost entirely on the collection of sales tax on remote sales of
tangible products and has produced a myriad of proposals for
immediate action that have ranged from allowing states to collect
sales taxes on all transactions to imposing a permanent moratorium on
any taxes on the Internet.
   (c) The Advisory Commission on Electronic Commerce, created by
federal law in 1998 to develop "tax and technologically neutral"
recommendations, thus far has failed to achieve a two-thirds majority
vote on a recommendation that it can send to Congress for a national
solution that would apply in all states.  Furthermore, the
commission's charter did not lead it to examine the critical
interrelated policy issues of tax equity and government sustenance.
   (d) A roundtable of tax and technology experts that convened
recently at the University of California Berkeley School of
Information Management and Systems cautioned that "critical decisions
about e-commerce taxation should not be made without further neutral
and unbiased research."  Its report specified several areas for
detailed study that relate, not only to sales tax issues, but to
technology and consumer behavior in the new economy, as well.
   (e) The Legislative Analyst, in a January 2000 report titled
"California Tax Policy and the Internet," recommended that the
Legislature undertake a comprehensive review of the sales and use
tax, as well as telecommunications taxes and the corporate income
tax, in relation to e-commerce activity and its impact on tax
administration, tax equity, and overall state revenue.
   (f) California's current tax structure is largely based on a 20th
century industrial economy that produced most of its wealth from
manufacturing and agriculture.  California's 21st century
technology-dependent economy is already based largely on information
and services, part of a new global economy that is built on the rapid
development of ideas and the exchange of information using multiple
communications media.  It is characterized by rapid restructuring of
business-to-business and business-to-customer relationships in the
state and across the world and a shift from production and
consumption of tangible goods to use of intangible goods and
services.
   (g) Numerous reports, including the California Economic Strategy
Panel's "Collaborating to Compete in the New Economy" have identified
the characteristics of our state's economic transformation at the
end of the last century.  That report concluded that the state's
developing economy is one that is "fast, flexible, global, networked,
and knowledge-based."  There is a need to reevaluate our entire
system of tax policies and collection mechanisms in light of this new
economy.  California should lead the way for all states in designing
a 21st century tax system.
   (h) State and local revenues are generally performing well, based
on the state's strong economic performance.  This situation provides
an opportunity to assure that the tax system performs as well as
possible during periods of weaker economic performance, and
altogether to assure that sufficient revenues are available for
governments to continue providing the services essential for an
economy to expand and prosper, by:  (1) removing inconsistencies and
inefficiencies, (2) addressing equity and fairness concerns, (3)
improving administration, and (4) considering base-broadening
measures.
   (i) Our tax policies must continue to be formulated in ways that
recognize the need for government to provide resources for investment
in the infrastructure necessary for economic growth, as well as to
provide for the legitimate health, public assistance, and safety
needs of our citizens.
   (j) It is the purpose of this act to create an open, public, fair,
and balanced participatory process for the development of a
long-term strategy for revising state and local tax structure for
California that eliminates needless complexity and nurtures and
expands the state's global leadership in key emerging industries and
for businesses that are repositioning to take advantage of the new
economy.  That policy must balance tax restructuring with the
generation of sufficient resources to continuously improve California'
s educational system, its physical and information infrastructure,
its quality of life, and promote shared prosperity.
  SEC. 2.  Part 18.3 (commencing with Section 38061) is added to
Division 2 of the Revenue and Taxation Code, to read:

      PART 18.3.  CALIFORNIA COMMISSION ON TAX POLICY IN THE NEW
ECONOMY

   38061.  This part is known and may be cited as the "California
Commission on Tax Policy in the New Economy."
   38062.  The California Commission on Tax Policy in the New Economy
is hereby created.
   38063.  The commission shall be comprised as follows:
   (a) Nine voting members of the commission, of which three members
shall be public members representing business, three members shall be
public members representing local government, and three members
shall be at-large members who may represent various segments of the
public, including, but not limited to, academia, organized labor, and
public interest groups.
   (1) The Governor shall appoint five members, taking into
consideration the importance of bipartisan representation of public
members.  The Governor shall designate one of the public members as
Chair of the Commission.
   (2) The Senate Rules Committee shall appoint two members,
including one upon recommendation of the minority party.
   (3) The Speaker of the Assembly shall appoint two members,
including one upon recommendation of the minority party.
   (b) Ex officio nonvoting members shall include all of the
following:
   (1) The Executive Officer of the Franchise Tax Board, or a
designee.
   (2) The Chair of the State Board of Equalization, or a designee.
   (3) The Director of Employment Development, or a designee.
   (4) The Chair of the California Public Utilities Commission, or a
designee.
   (5) The Director of Finance, or a designee.
   (6) The Controller, or a designee.
   (7) A public member of the California Economic Strategy Panel to
be appointed by the Secretary of Trade and Commerce.
   (8) The Chair of the Senate Committee on Revenue and Taxation, or
a designee.
   (9) The Chair of the Assembly Committee on Revenue and Taxation,
or a designee.
   38064.  The commission may form additional technical assistance
workgroups, including experts from government, academia, and the
private sector, and interested public stakeholders, as necessary to
complete its work.
   38065.  The commission shall do all of the following:
   (a) Identify all the key stakeholders in the new economy and
invite them into the commission's process.
   (b) Develop a comprehensive agenda of goals and a roadmap of all
critical issues that ought to be addressed in achieving a workable,
flexible, and balanced long-term solution.
   (c) Undertake the process of conducting public hearings and in the
correct phases address each of these critical issues and seek to
arrive at a comprehensive conclusion with respect to the smartest
public policy taxation of the Internet.
   (d) Examine and describe all aspects of the current and future
California economy, with special attention to the influence of new
technologies, including, but not limited to, the use of the Internet
in electronic commerce.
   (e) Assess the impact of those predictions about the economy on
the sources and size of projected public revenues, with special
attention to the needs of local government.
   (f) Study and make recommendations regarding specific elements of
the California system of state and local taxes, including, but not
limited to, the following:
   (1) With respect to the sales and use tax, the commission shall do
all of the following:
   (A) Examine the impact that economic transitions have had on the
sales and use tax.
   (B) Determine whether uneven treatment with respect to the method
of sales, the type of commodity, and the location of the buyer and
the seller may occur and the extent to which they may have led to
tax-generated distortions in economic decisionmaking and
disadvantages for certain businesses and economic sectors.
   (C) Examine the extent to which the allocation and distribution of
sales and use taxes impact local decisionmaking on land use and
whether alternative methods may be more appropriate.
   (2) With respect to telecommunications taxes, the commission shall
examine the status of the current telecommunications tax system,
including state telecommunications surcharges, utility user charges,
and franchise fees, in light of changes in the competitive and
technological features of the industry.  This examination should
focus on the complexity, consistency, and efficiency of the system.
   (3) With respect to income taxes, the commission shall do both of
the following:
   (A) Examine recent trends in the collection of bank and
corporation taxes and the impact that a transitioning economy has had
on those trends.
   (B) Examine the relationship between the bank and corporation tax
and the personal income tax and whether trends in the new economy
will have an impact on that relationship.
   (4) With respect to property taxes, the commission shall do both
of the following:
   (A) Investigate the revenue repercussions for local government in
assessment of real property, assuming changes in the trends of real
property versus personal property utilization.
   (B) Examine the effects of electronic commerce activity on
land-based enterprises in the new economy and evaluate the impact on
local economic development approaches and consider what new tools
could be used.
   38066.  The commission shall submit an interim report to the
Governor and the Legislature not later than 12 months from the date
of the commission's first public meeting and a final report with
recommendations not later than 24 months from the date of the
commission's first public meeting.
   38067.  This part shall remain in effect only until January 1,
2004, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2004, deletes or extends
that date.
